Apple, Amazon and Google Executives Visit Samsung to assess the Potential Crisis in Smartphone Supply Shortage
On June 30th Patently Apple posted a report titled "Apple's Display Partners Samsung & LG Caught up in Political Ruling with Japan that could Disrupt the Smartphone Sector." The thrust of the report was about Japan restricting fluorinated polyimide which is used in smartphone displays, and resist and high-purity hydrogen fluoride (HF), which is used as an etching gas in the making of semiconductors. Japan produces about 90% of fluorinated polyimide and resist worldwide as well as about 70% of etching gas, making it difficult for chipmakers to find alternative supplies.
The situation is now serious enough that Silicon Valley's elites including Apple, Amazon, Microsoft and Google, have dispatched their respective executives and employees to South Korea to gauge the fallout of the ongoing trade war between Seoul and Tokyo, according to industry sources.
The U.S. tech firms are said to be especially worried about the possible impact on Samsung Electronics’ DRAM memory chip production. Samsung is the main supplier of DRAM and NAND flash memory chips for Apple’s iPhones.
An industry source with knowledge of the matter said that "The officials (from the US tech firms) were not here just to review their existing contracts with Samsung, but also to monitor the current market conditions here after Japan recently implemented trade restrictions. They discussed the current situation with Samsung officials."
Amazon, Google, and Microsoft are some of the largest customers of Samsung’s memory chips as they utilize the semiconductors at their data centers that handle a large amount of data for cloud services. DRAM plays a key role in reading and writing such data.
Samsung is a dominant player in the global DRAM segment, as it took the lion’s share with 45.3 percent market share last year.
Along with Apple and other tech company executive descending on Samsung to get a grasp of the situation concerning DRAM and NAND flash memory chips and display supplies, U.S. Assistant Secretary of State for East Asian and Pacific Affairs David Stilwell said yesterday that the U.S. government may intervene in the ongoing economic disputes between South Korea and Japan although it has yet to be found out which one it is going to side with.
Stilwell had a meeting with National Security Office Second Deputy Chief Kim Hyun-chong and Special Representative for Korean Peninsula Peace and Security Affairs at the Ministry of Foreign Affairs Lee Do-hoon in Seoul. After the meeting Stilwell stating in his press conference that "The United States is hoping that South Korea and Japan will find solutions to their sensitive issues and the United States will do what it can do to help them as their close partner and ally."
Stilwell's visit yesterday being public was very important because today is the deadline for South Korea to respond to Japan's suggestion to seek third-party arbitration for the issue that sparked the crisis.
In the longer run South Korea's two largest chipmakers Samsung and SK Hynix have begun testing the use of locally-produced etching gas - also known as hydrogen fluoride - in making memory chips.
Experts say it would be difficult but not impossible to replace Japanese materials with those made in South Korea. But it could take months of testing and it remains to be seen if local suppliers can achieve the same high-precision quality.
In the longer run, Japan will lose its largest customers Samsung and SK Hynix which will hurt a strong industry of theirs. There is no upside for the Japanese companies involved.
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